Hill GOP Offers Alternative Plan To Slash Taxes

By Art PineBy Art PineOctober 6, 1977

Congressional Republicans, mindful of President Carter's coming tax-revision recommendations, yesterday laid out a plan of their own that would slash taxes for individuals by an average 33 per cent over the next three years, but would not close any "loopholes."

Senate and House Republican leaders held a joint press conference to portray their proposal as a "challenge" to the Carter plan. The GOP alternative would primarily benefit low and middle-income taxpayers and corporations.

Meanwhile, ReP. A1 Ullman (D-Ore.), chairman of the House Ways and Means Committee, predicted his panel will cut back substantially one of the key proposals Carter is expected to make - to eliminate, the special tax treatment of capital gains, which are profits from the sale of stock or other property.

In most cases now, half such gains are exempt from taxation.

Ullman said in an interview that "we can't do away with (this treatment of) capital gains totally," as the President may request. He said that existing preference would be pared back "only to the extent that we can find some other" investment incentives, and that he expects no change in present law for some industries, such as timber.

The GOP plan was intended primarily as a political document. Republican leaders said the party intended to promote the proposal by sending out traveling "tax squads" similar to "truth squads" used on the lecture circuit by the Nixon administration.

In what may prove a catch phrase for that campaign, Rep. John J. Rhodes (R-Ariz) told reporters that when the President's energy-tax provisions are taken into account, the administration "is not proposing tax cuts - it's proposing tax increases."

However, the Republican proposal is not expected to go very far in Congress, Sen. Howard H. Baker Jr. (R-Tenn.), the Senate minority leader, hinted Republicans may try to tack the plan onto the energy tax bill, but the general expectation is that that will fail.

The GOP program would cut taxes for individuals by an average 33 per cent between now and 1980 by gradually paring tax rates from their present range of 14 to 70 per cent to a new span of 8 to 50 per cent. The low end of the new Carter rate range is expected to be 12 per cent.

For business, the plan would redue the corporate tax rate by a percentage point a year for three years to 45 per cent by 1980. At the same time, the so-called surtax exemption below which corporations pay a maximum of 22 per cent would be raised from the present $50,000 to a new level of $100,000.

The sharpest cuts for individuals would be in low and middle-income brackets. Taxpayers earning $8,000 or less would see their taxes slashed 90 per cent, while cuts in other income categories would range from 33.6 to 49.3 per cent.

The GOP leaders estimated that their package would reduce Treasury revenues by $11.35 billion in 1973, with $10 billion targeted for individuals and $1.35 billion for business. By 1980, that cost would swell to about $41.2 billion. All cuts would be permanent.

However, Rep. Jack Kemp (R-N.Y.). the primary House sponsor of the package, argued that the cost would be ofset because the tax cuts would spur new business and consumer spending that ultimately would generate higher tax receipts. He contended the "net" cost would be $5 billion to $10 billion.

The statements by Ullman were important because the elimination of the capital gains preference is a linchpin of the overall Carter tax-revision strategy. The President is counting on increased revenues from ending that big tax break and some esser ones to finance reductions for business and individuals.

The Ways and Means chairman declined to say specifically how much of the capital gains preference he might cut back. However, he said, "we will keep enough of (the present) capital gains (tax break) to keep a dynamic incentive in the system."

The capital gains proposal is considered likely to be the most controversial portion of the coming Carter tax package. The President promised during the campaign to eliminate the longstanding preference. However, proposals drafted by the Treasury have suggested some compromises.

Congressional Republicans have tried several times before to substitute a permanent tax cut for corporations and middle-income taxpayers for whatever tax bill the administration was proposing. Yesterday's measure has failed in the Senate, in one form or another, 11 times.